Economic Freedom Defined

George Orwell could not have predicted when he wrote 1984 that his fictional concept of words being mangled by “newspeak” to mean their opposites would ever become a reality. Well, it has, right here in South Africa. Just as he imagined that “freedom” became to mean slavery in his fiction, so “economic freedom” has come to mean economic slavery in South Africa.(1) That the ANC Youth League has stolen our term is a sick compliment to our success at popularising economic freedom.

What is economic freedom in plain language and in newspeak? It has such a well-established and universally acknowledged meaning in that anyone who predicted a few months ago that it would be used to connote its opposite and be taken seriously would have been asked what they were smoking.

Last Thursday, a few thousand people marched for “economic freedom”. No, the march was not organised by the Free Market Foundation. Nor did anyone taking part seem to be “for” economic freedom or to actually know what it means.

Imagine that! Marching for something without knowing what it is you’re marching for. It’s like marching for “Christianity” without knowing what religion is in a march organised by atheists. What happened was so surreal that people in other countries can be excused for assuming that what really happened was misreported.

Economic freedom is simply the economic aspect of freedom, that is, the relative absence of government ownership and control of human and non-human resources. Documents explaining why the march was organised envisage the opposite ... in the extreme.

Let’s start with the boring stuff, how dictionaries define “economic freedom”. They don’t, at least not as a single concept. Economics is about the allocation and use of scarce resources, and freedom is, for example, “freedom to prosper … without intervention from a government”(2), “the state of being unrestricted”(3), and “exemption or liberation from the control; liberty; independence”(4). What recognised definitions entail is personal liberty, especially secure and freely tradable private property rights.

Advanced definitions are used for such scholarly purposes as measure economic freedom, formulate policy, and make international comparisons. After a decade of research by over sixty economists, including four Nobel Laureates, there is “wide agreement on central elements: secure property rights, freedom to engage in voluntary transactions, freedom from governmental control, and freedom from governmental expropriation.”(5) The “four cornerstones” of economic freedom are “personal choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression.”(6)

The two most widely recognised measures of economic freedom are the Economic Freedom Index(7) and Economic Freedom of the World.(8) According to the former “government control ... limits economic freedom” and “the highest form of economic freedom” is “an absolute right of private ownership” and “an absolute absence of coercion or constraint” beyond that necessary “to protect and maintain liberty”. In other words, freedom to “work, produce, consume, and invest in any way they choose.” The latter uses corresponding definitions and measures economic freedom according to nearly fifty weighted and independently published criteria of freedom from government interference with private property, rule of law, absence of red tape, freedom from labour market regulation and low taxes.

In short, what all coherent definitions share is that there is economic freedom to the extent that people are free from government control, governments protect rather than threaten assets, and the means of production and distribution are privately owned.

Because the word “freedom” is ambiguous, it is sometimes used to connote “freedom from”, such as freedom from disease, poverty, stress or crime. To the extent that the ANCYL wants freedom from poverty and unemployment all decent people agree. Since prosperity and decent employment are promoted by, and only by, real economic freedom in free market economies, that is what the ANCYL ought to be demanding. Instead, the march was joined by the ghost of an incredulous George Orwell’s witnessing ‘economic tyranny’ being called ‘economic freedom’ with scarcely a commentator noting the irony.

All decent people agree with the ANCYL that something effective should be done about the crisis of unemployment and poverty, and there is much in its sources on economic freedom consistent with the concept, such as the vision of a “non-racial, non-sexist, democratic, united and prosperous nation, wherein all people will live together in harmony with equal access to social and economic opportunities”, “political social and economic emancipation of the black majority” and the idea that economic freedom is the solution. The problem is confusion about what economic freedom is, and how and why it is clear from the world’s experience that it works.

Needless to say, what ANCYL sources propose, if implemented, would benefit its leaders obscenely. They stand to be the enriched and empowered commissars of massive government empires. The erosion of economic freedom is the primary means by which people unwilling or unable to produce wealth become megalomaniacal elites. That wouldn’t bother me much. The problem is that it would be at the extreme expense of the unemployed and destitute youth they represent. Decent people are more concerned about the plight of those “at the bottom” than the fortunes of those “at the top”.

There is something the poor know that eludes people who protest too much about poverty. Always and everywhere they migrate, risking and often losing their lives, from countries with less economic freedom to those with more. Americans don’t escape to Cuba, South Koreans don’t flee to North Korea, and Botswanans aren’t flooding into Zimbabwe. The poor know that the best place to be poor is where there is more economic freedom; that government can do more for the poor by doing less.

AUTHOR Leon Louw is the Executive Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 01 November 2011

(1) The main sources on what the ANCYL means by “economic freedom” are (a) its Declaration of the 24th National Congress, (b) the “Final Document for the ANC Youth League 24th National Congress”, A Clarion Call To Economic Freedom Fighters: Programme Of Action For Economic Freedom In Our Lifetime (April 2011), and (c) Memorandum to the Executive at the Union Buildings (28 October 2011). These and related sources are characterised by contradictory and convoluted language at times consistent with economic freedom and at others advocating its opposite in its name.
(2) Business Dictionary.
(3) Oxford.
(4) Webster’s.
(5) Alvin Rabushka, 1991.
(6) Matt Mitchell, What is Economic Freedom and What Can it Say About Prosperity? Economic Policy, 2011.
(7) Heritage-Wall Street Journal.
(8) Economic Freedom Network.